Money Laundering Crackdown in Mongolia: New Law Enhances Preventative Measures

Ulaanbaatar, Mongolia, May 31, 2013

In a determined effort to strengthen its defenses against money laundering and terrorism financing, Mongolia’s parliament, the Great Khural, has passed a new law. The objective: to build a solid legal foundation for putting effective preventative measures in place against these illicit activities.

Key Provisions of the Law

The new legislation, entitled the “Law on Combating Money Laundering and Terrorism Financing,” covers various financial transactions and entities. These include:

• Banks
• Non-bank financial institutions
• Insurance companies
• Investment funds
• Licensed securities market entities
• Savings and credit cooperatives
• Real estate agents
• Notaries, and others

New Requirements

The legislation brings about several noteworthy provisions:

1. Broad Scope: This law covers a wide range of financial transactions and entities.
2. Reporting Suspicious Transactions:Entities responsible for these financial transactions are mandated to report any transactions they deem suspicious to the Financial Information Unit (FIU). Examples of suspicious transactions include those with unusually large sums, lacking clear economic or legal purpose, conducted on behalf of politically exposed persons, or made via countries with weak anti-money laundering and terrorism financing regulations.
3. Customer Due Diligence: Entities must verify the identities of their customers through reliable independent sources or documentation like national identity cards, registration and taxpayer numbers, and detailed information on the entity’s management.
4. Correspondent Banking Relationships: Mongolian banks are expected to secure specific information before initiating correspondent account relationships with foreign banks to prevent working with shell banks or banks involved in money laundering or terrorist financing activities.
5. Record Retention: Entities must keep records and information of transactions, accounts, and customer details for at least five years to ensure their timely availability to competent authorities.

Empowering the Financial Information Unit (FIU)

The FIU, a newly established autonomous and independent body, will play the primary role in monitoring, analyzing, and disseminating reports of suspected money laundering and terrorism financing activities to competent law enforcement authorities. It will be located at the Bank of Mongolia and boasts the power to request inquiries from government agencies.

FIU Responsibilities

Competent law enforcement authorities are granted the right to conduct supervision and access necessary information from the FIU to investigate possible violations of the law. In addition, law enforcement officials may be seconded to the FIU to foster closer collaboration.

This new law seeks to provide Mongolia with a more robust framework to prevent and combate money laundering and terrorism financing by ensuring that entities comply with their obligations and report suspicious transactions to the pertinent authorities.